Musk’s Hostile Tender Offer for OpenAI (c)(3) Triggers Revlon Duties, Throws a Big Wrench
Let’s check in on the battle of the billionaires. As loyal readers recall, OpenAI (c)(3) looks to sell its technology transfer arm to a public benefit corporation and then take an equity interest in the PBC. “New” OpenAI (c)(3) will continue its research function and probably use the PBC as an exclusive licensee if it can get away with it.
Well! Last week, Altman put the ki-bosh on any hope of a preliminary injunction. But yesterday, Sam Altman’s arch nemesis Elon Musk and a bunch of his friends with lots of spare change made what amounts to a hostile tender offer worth $97.4 billion for OpenAI (c)(3). In his hasty and ill-advised response on X, Altman threw some shade, saying “no thank you,” and noting that the platform formerly known as Twitter is worth only 10% of Musk’s tender offer. I got a good chuckle. Musk responded online by calling Altman a “swindler.”
Unfortunately, OpenAI’s trustees can’t be so glib when they finally reject Musk’s offer, as they surely plan to do. The Board will have to explain why and how Altman’s shady text didn’t suggest his influence and control of the board. It’s not just criminal defendants who ought to STFU, I guess. Since the Board has made it clear that a sale is inevitable, the Board probably has Revlon duties now and Altman’s inability to resist throwing shade won’t help. An overly abbreviated summary of Revlon and its progeny is this: having made clear its intention to sell, the Board must now get the best price. The trustees must maximize shareholder (i.e., the public) value. There are lots of things the Board may consider (a buyer’s creditworthiness, for example) but the overall mandate is to get the highest price. And by the way, Musk and his pals are walking around with their chests poked out, assuring anybody who will listen that they will beat any offer.
There is so much more to unpack here. OpenAI (c)(3) wants to sell, alright, but only to a nominally independent public benefit corporation through which “new” OpenAI (c)(3) can exploit its tax subsidized intellectual properties via exclusive licenses to the PBC. I told you about this months ago. And the nominally independent public benefit corporation can exploit the tax subsidized research for private gain. It’s supposed to work seamlessly, I think. Musk’s determination to beat any other offer puts a big wrench into that plan.
Advantage, Musk.
darryll k. jones